Ground Rents Income Fund plc

Refinance of Loan Facility

Ground Rents Income Fund plc (the 'Company') announces the refinancing of its existing £25 million loan facility with Santander UK plc ('Santander'), which was due to expire in January 2025. The loan was put in place in 2019, comprising a £12.5 million term loan and a £12.5 million revolving credit facility, with an aggregate £21 million currently drawn.

The new loan terms include:

• A new £19.5 million facility with an extension in the loan term from January 2025 to 10 July 2026.
• ​The new loan has a margin of 2.75% per annum, an increase of 90 basis points compared to the previous margin of 1.85% per annum.
• Existing hedging will remain in place until expiry in January 2025, consisting of an interest rate swap on £12.5 million at 0.83% per annum and an interest rate cap on £5.5 million at 1.00% per annum.  This results in a total current interest rate of 4.0% per annum.  Based on the previous total loan drawn of £21.0 million and existing hedging, the effective total current interest rate was 3.5% per annum (inclusive of a non-utilisation fee).
• Five assets added to the security pool for a combined value of £9.5 million, increasing total charged assets to £53.6 million, resulting in a loan to value ('LTV') ratio of 36.4% compared to a covenant of 50%.
• Refinancing consistent with the strategic objective to realise assets in a controlled, orderly, and timely manner, by providing more time to effect disposals.  Santander's agreement to accept new assets also provides more headroom against loan covenants.

As part of the refinancing, the Company has used £1.5 million of recent disposal proceeds to reduce the new loan facility to a total of £19.5 million.  Santander can require all future proceeds from charged asset disposals to be used to repay the loan facility.  The new loan facility also requires amortisation of £62,500 per quarter from January 2025, with future disposal proceeds net against the aggregate remaining amortisation amounts.  There are no commitment or early repayment fees.

The Board and Manager will review hedging options in advance of the existing hedging expiring in January 2025, having regard to the outlook for interest rates and further progress with disposals.

Including the addition of five new assets, Santander's independent external valuation of the security pool is £53.6 million, reflecting a LTV ratio of 36.4%. This compares to a LTV covenant of 50%.  At completion the interest cover ratio ('ICR') is 301%, which compares to a current ICR covenant ratio of 200%, with the covenant level reducing to 160% in January 2025.  Santander's independent external valuation includes the industry wide Material Valuation Uncertainty Clause because of uncertainty relating to both leasehold and building safety reform.

Based on the Company's latest unaudited, published, independent portfolio valuation as at 31 March 2023, following the refinancing the group LTV, net of cash, is 13.8%.  The Company's remaining assets are uncharged and comprise property assets valued at £55.2 million (as at 31 March 2023) and cash of £4.6 million.

For further information:

Notes to editors:

Ground Rents Income Fund plc is a closed-ended real estate investment trust, listed on The International Stock Exchange ('TISE') and traded on the SETSqx platform of the London Stock Exchange.

Schroder Real Estate Investment Management Limited (the 'Manager') was appointed as the Company's Alternative Investment Fund Manager in May 2019 to support the Company's Board with the headwinds related to building safety and leasehold reform.

During the first half of 2023 the Board and Manager carried out an extensive shareholder consultation on proposals to change the Continuation Vote mechanism included in the Articles dating from 2012, as well as proposed changes to the Investment Policy.  These proposals received strong support from shareholders and resulted in a new Continuation Resolution and Investment Policy.  The new Investment Policy adopts a strategy of realising the Company's assets in a controlled, orderly and timely manner for shareholders, whilst continuing to deliver best-in-class residential asset management including fairness, transparency, and affordability for leaseholders.

On 9 November 2023, the Government published a consultation on restricting the level of ground rent which leaseholders in England and Wales pay for existing leases.  The consultation represents a significant shift in the Government's approach to leasehold reform and could have a materially adverse impact on the value of the Company's underlying portfolio.  The Company submitted a comprehensive response to the consultation on 17 January 2024 and has kept shareholders informed of this consultation, including through regulatory announcements made on 20 November 2023 and 16 February 2024, which can be found at: www.groundrentsincomefund.com

The potential outcome and timing of further legislative change following the Government consultation remains highly uncertain, and the Company will notify shareholders when there is further clarity. 

Due to ongoing work relating to leasehold and building safety reform, the Company has delayed the release of its year-end audited accounts from early 2024 to during the quarter ending 30 June 2024.  This extension has been approved by Companies House and TISE.  The Company expects to hold a separate Extraordinary General Meeting in advance of 30 June 2024, at which the Accounts will be presented to shareholders and shareholder resolutions relating to the Accounts will be proposed.

See the Company's website for more information:

www.groundrentsincomefund.com